No business plan: Holden has clearly considered building a quality mid-size car like the Torana concept car.

photo via webwobat.com

HOLDEN has rejected suggestions from a visiting international motor industry expert that Australian car-makers should move away from large cars and instead build small or hybrid cars.

Holden director of engineering Tony Hyde told GoAuto that it was not economically feasible to build small cars for Australia.

Mr Hyde said that Holden was very happy with its large-car program and would continue trying to expand its volumes through exports.

He was responding to comments made by the president of the Detroit-based Center for Automotive Research, Jay Baron, who was a keynote speaker at last week’s ‘Change By Design’ conference – an annual government-backed event run this year by the Society of Automotive Engineers (Australasia)

Mr Baron told local industry representatives at the conference that Australian car-makers needed to change direction because large rear-wheel drive cars were in decline.

In an interview with Go Auto, he also warned about exporting more cars than we make for local consumption.

“I think that’s a dangerous business case to be riding on, given the downturn of rear-wheel drive cars,” said Mr Baron. “It’s just a risk because the volumes of those markets are going down. Who’s going to be buying those vehicles in five years? It’s a risk.

“There is obviously a demand for rear-wheel drive vehicles, but it is more of a niche area. You are dealing with a market that’s getting smaller, not bigger.

“Where you go from the current infrastructure to where the car market is going to be in five years, whether it’s hybrids or small efficient cars or a combination of that … even if you knew where it’s going to be in five years, how well can you influence that move, given that you have GM, Ford, Toyota all with plants here?”

However, Mr Hyde said that none of the Australian manufacturers could afford to build small cars to compete with imports, as had been proven in the past.

“We could go and design a small car, but I don’t think there’s any way you could do it economically in Australia,” Mr Hyde told GoAuto. “It may not cost a billion dollars like with VE (Commodore), but you still have to spend a swag of money and you can only sell them in the $17,000 to $22,000 range, and you don’t make much out of a car in that range.

“And your volume would not be guaranteed because there’s a lot more competition down in that area of the market than there is in the large-car market where we are now, so trying to get your $600-$800 million (investment) back … I just can’t see it being viable.

“There’s no coincidence that all the other (manufacturers) have stopped making that sort of car in Australia. They’ve gone out of that business. It is absolutely more business-friendly to go out and import the damn things.”

Mr Hyde also rejected the suggestion of building more highly-specified small cars with bigger profit margins.

“The higher you go, the less volume you get. The temptation is there to do, say, a 3 Series BMW equal or something like that, a la the Torana show car, but there’s still a fair amount of cost in those cars,” he said.

So Holden is happy to follow its present path, with large rear-wheel drive cars being exported to primarily North America and the Middle East.

“We still believe that there’s good life in Commodore and global rear-wheel drive from an Elizabeth plant point of view,” Mr Hyde told GoAuto. “In the future we might be told to build something else, but it still wouldn’t be relying solely on this domestic market – you’d be exporting heaps of them.

“Both Toyota and ourselves have very strong export programs out of Australia and I think it helps both companies.

“I am very happy that we got the means of getting into the Middle East back in the mid-’90s; we made the decision to go and do left-hand drive and all the things that’s brought to us.”

Mr Hyde conceded that the only real volume rear-drive large car opportunities for Holden were in North America and the Middle East, despite recent moves into Korea (“It’s a good deal and should be ongoing, but not high volume”).

“I floated Russia there for a while and I still personally believe there are opportunities there, but that’s not on the agenda at the moment.”